MPs will today seek to curb the activities of "vulture funds" that prey on poor countries by buying their sovereign debt cheaply and then going to court to enforce repayment of the full value.

Labour MP Sally Keeble will lead a group of 12 cross-party MPs in calling in parliament for a Developing Country Debt (Restriction of Recovery) bill that would seek to ban hedge funds and other creditors from taking legal action to make large profits out of the debts of some of the world's poorest countries.

Such funds, many of which are based in the US or the British Virgin Islands, often use British courts and law firms to pursue claims against poor countries, such as Zambia, the Democratic Republic of the Congo and Liberia.

"These vulture funds have been engaged in completely unregulated profiteering in third world debt," Keeble said. "This bill puts forward some basic measures to clip their wings."

The bill is backed by anti-poverty group Jubilee Debt Campaign, which is leading a campaign against the funds.

"This bill would represent a major step forward in tackling these odious funds," said Nick Dearden, the group's director. "It cannot be right that companies are allowed, in British courts, to make enormous profits out of the suffering of millions of the world's poorest people. Tackling vulture funds should be an urgent priority."

Gordon Brown, the prime minister, has often criticised vulture funds and called for international action to ensure they cannot thrive. He wants the World Bank to help poor countries eliminate their commercial debts and creditors to establish a legal fund to help countries defend themselves.

But despite an early-day motion signed by 110 MPs a couple of years ago urging the government to follow the example of influential US Congressman John Conyers, who pressed President George Bush to change US law to outlaw vultures, no action has been taken.

Vulture funds buy the debt of poor countries on the open market - usually at very low prices because of the small likelihood of it ever being repaid. The funds then go to court to demand repayment of the face value of the debt, which is often many times higher than they paid for it. The debt was often run up by corrupt dictators who have long since gone.

At least 54 companies are known to have taken legal action against 12 of the world's poorest countries in recent years, for claims amounting to $1.8bn (£1.2bn). Vulture action is being undertaken against Ethiopia, Cameroon, Argentina, the Democratic Republic of the Congo and others, according to World Bank reports.

The bank has said, though, that its figures are unlikely to reflect the true value of such actions, which could be much higher.

In 2007, Donegal International, based in the BVI, made the news when it won $15.5m repayment in the high court for Zambian debt it had bought several years earlier for $3.3m. Two-thirds of Zambians live on less than $1 a day, and debt relief was intended to free up vital resources for healthcare and education.

The Keeble bill provides for an end to hedge funds and other investors buying up poor country debt at cut-rate prices and then suing them through the British courts. UK legislators are working in conjunction with counterparts in the US, where similar legislation, the Stop Vultures Act, is being introduced to the House of Representatives this month by Congresswoman Maxine Waters.

The US and UK are the two most popular jurisdictions for vulture funds to take legal action, with the UK alone accounting for about one-fifth of vulture cases. Firms such as Allen & Overy, Weil Gotshal, and Dechert all count vulture funds among their clients, which include Donegal, Kensington International and Elliott Associates.

Last month the Liberian government announced it had reached a deal with its commercial creditors to pay off its vast commercial debt at a rate of three cents on the dollar.

The total cost of the buyback of $1.2bn in commercial debt was $38m and was financed by the debt reduction facility of the World Bank, with contributions from the International Development Association, the US, Norway, Britain and Germany. It said 97% of Liberia's commercial creditors had participated in the buyback, meaning that vulture funds were effectively barred from taking action against the country in future.